HD Radio: Will More Awareness Translate To Sales?

By Amy Gilroy On Dec 3 2007 - 8:00am

NEW YORK — HD Radio car equipment is selling at a moderate rate, according to suppliers who note that sales may improve as prices drop.

Over the past year, consumer awareness of the format has soared, but this has yet to translate into strong demand, said suppliers, many of whom state privately that sales of their products are below expectations.

About 1,500 radio stations now broadcast in HD Radio, reaching 80 percent of the population. A hefty $250 million in advertising was devoted to HD Radio this year with another $230 million earmarked for 2008, according to the HD Radio Alliance.

Industry members say this campaign has successfully placed the name "HD Radio" in consumer's minds, but has fallen short in explaining digital radio's key attributes of better sound and the ability to offer more radio stations through multicasting.

Keith Lehmann, Kenwood consumer electronics senior VP, explained, "The awareness of HD Radio is high, but people still don't really know what it is or what the benefit is. The campaign put forth by the HD Radio Alliance has been rather shallow in my opinion. It's gotten the name out there but hasn't gotten the full message. The industry can do a better job of promoting the real value of HD Radio to the end user."

Audiovox Electronics president Tom Malone added, "From our perspective HD Radio is gaining some momentum," but he noted this has not yet translated into strong consumer sales of the product.

Sales of the Alpine TUA-T500HD add-on HD-Radio tuner/adapter have been "slightly below our conservative forecast" said Alpine marketing VP Steve Witt, because some 2006 Alpine radios could not control multicasting from the adapter. Other suppliers also said their HD-Radio sales were below expectations.

But many are hoping that lower prices will fuel sales.

JVC Mobile, the first brand to offer HD Radio in a sub-$200 head unit, said its KD-HDR1 is selling above expectations. "I think what the other manufacturers are seeing proves our point that it's a price-point-based scenario. Once you hit that sweet spot, HD Radio seems to be doing quite well," said VP Bill Turner.

Dual and Jensen are now testing that theory. Dual just began shipping a CD receiver with built-in HD Radio at a record-low street price of $119, and Jensen is selling at $129 through Wal-Mart with a $139 model slated for December.

JVC said it will offer an updated version of the KD-HDR1 in the future. Panasonic also plans to expand its HD-Radio lineup, and Alpine said it has an aggressive plan for HD Radio in 2008 with full multicasting-control head units and other products to be announced at International CES.

Eclipse marketing director Michael West said, "The jury is still out on HD Radio, but I think the verdict will be success in the year 2008 … It reminds me of Bluetooth, Every hardware maker got behind it years ago — as far back as 1999 as I recall — but it took some years for it to explode on the scene in 2006 and 2007."

Retailer opinion on HD Radio appears mixed.

Car Toys merchandising senior VP Dan Jeancola said, "HD Radio continues to grow at a rapid pace. With more products arriving just in time for the holidays ... we look forward to incredible improvement in both sales and consumer awareness."

Harvey Wright, CEO of Autosound of Lexington in Lexington, Ky., said, "I don't think I've had a single customer ask for it, even though they are doing a lot of advertising on the radio … If someone is buying a new radio, they'll ask if the radio has it, but they won't come in and buy a new radio just for HD."

Audio Express, Scottsdale, Ariz., said it recently began advertising HD Radio and has seen an increase in sales as a result.